This event brings together distinguished personnel from banks, government bodies and technology companies to discuss and address crucial issues on how to seize new opportunities in retail banking and wealth management while making it beneficial for all stakeholders.
Interview with our speaker Christopher Skak Nielsen
Christopher Skak Nielsen, Head of Liquidity Risk Management at Danske Bank shares his views on Basell III framework, stress testing models and more:
Christopher Skak Nielsen
Head of Liquidity Risk Management
Liquidity stresses were a key factor in the downfall of banks such as Lehman Brothers. What is your opinion on that? Could they have prevented the fall? What are the lessons learnt?
The liquidity stress was the straw that broke the camel’s back for Lehman Brothers, but the problem was the underlying structural mismatch match on the balance sheet and the building of losses, which increased the solvency pressure. Many of the lessons learned from the financial crisis and from cases like Lehman Brothers and Northern Rock are being addressed with the introduction of LCR and NSFR through Basel III and other legislation such as the Money Market reform in the US.
Does Basel III address the issue of liquidity more thoroughly than Basel II? How?
Basel II did not introduce new regulation for liquidity and the requirements on liquidity were prescriptive rather than quantitative. Basel III introduces LCR and NSFR, which are two comprehensive measures, which address liquidity and funding resp.
Some experts say that liquidity stress tests are more difficult to conduct than capital ones. Why?
There are large sources of information on credit cycles for credit risk and market volatility for market risk, which can be used for capital stress testing. Very few banks have experienced a full liquidity stress and few banks survive it. So most banks have to calibrate the parameters based on external events rather than own experience – and the number of external events might be limited for the market in which the bank is operating in. In addition, the external data might difficult break into the categories, which are granular enough for the calibration. This leaves room for interpretation when calibrating the parameters.
Is there a linkage between the liquidity stress scenarios and the capital ones?
Scenarios are typically build around one or more events, which drives up the risks. For capital scenarios, the driver is typically macro-economic. Liquidity scenarios can be built of operational, reputation or capital events. So there can be a linkage with a capital scenario rolling into a liquidity scenario but they can also be analysed independently.
What are the key challenges of validating stress testing models?
The key challenges in validating are the same as in parameterisation the models – typically there is very little internal information to validate against.
You will talk about triggers – early warning indicators. Can you give us some examples of trends that may point to the development of a liquidity stress event?
Credit spreads in the financial markets are a good indication of the risk appetite and can therefore be seen as early warning indicators. It should not only be credit spread on the institution itself, but also for peers, for the sector and country/region in general. Other early warning indicators can be rumours and public opinion, which also are important to monitor.
Interested in this topic?
Operational Excellence in Insurance
The 5th Annual operational excellence conference is a must-attend event dedicated to enhancing digital operational excellence and overcoming the challenges surrounding digital transformation and the impact of technological development.
Credit Risk Management Forum
Credit risk management is still a big issue, IFRS 9 is going to be implemented, the digital era and big data is already influencing the banking sector and credit risk management as well. How can banks deal with all these issues?
Regulations & Safety in Cosmetics
Over the past five years, the cosmetic industry has met with several legislative changes. Within the new legislative package, including the new REACH and CLP, it is important to find a comfortable routine that will minimize costs while staying effective and compliant with all regulations.
Smart Workspace Design Summit 2016
Have a look on the infographic about the Smart Workspace Design Summit 2016.
Post Show Report 3rd Annual Oil & Gas Forum
Post Show Report from 3rd Annual HR Oil & Gas Forum
How important is the color of a car?
Have you ever thought about how important the color of a car is for insurers and insurants?